In the face of inflation, the French want to save more, but cannot

(BFM Börse) – Households’ willingness to save remains very high in the face of the inflationary shock, but they admit that they have difficulties lining their woolen stockings. According to the BPCE Observatory, inflation and changes in the remuneration of regulated savings products (Livret A, LEP, etc.) have blurred their choice.

The French are not shaking their reputation as “ants” and the recent rise in prices has become one of the top reasons for saving, finds the latest study by the BPCE Observatory. The desire of French households to put money aside is still the highest, especially since it is fueled by long-term concerns (pensions, rising national debt, etc.). At the same time, however, the French have never been more pessimistic about their ability to save since the beginning of 2019, a pessimism that particularly affects the most modest households facing inflation, the study adds.

A savings rate of over 16% expected in 2022

For BPCE economists, the French savings rate would remain close to 16.2% in 2022 and then decline slightly to 15.8% in 2023, down from 18.7% in 2021 and 21% in 2020. However, this savings rate would remain significantly higher than the pre-Covid average (between 14 and 15%). “While the recent increase in the savings rate is largely due to wealthy households whose propensity to consume is below average,” the study notes, adding that “the inadequate returns, particularly when higher inflation undermines the real value of their financial assets and forces encourage them to hold even more plentiful savings as these wealthy people anticipate future tax increases as public finances evolve”.

According to the same barometer, new financial investments will gradually continue to decrease, from 111 billion euros in 2021 to 89.6 billion euros in 2022. In 2023, they should represent a total of 66.7 billion euros. This fall would come after an all-time high of 149.3 billion euros in 2020. According to the BPCE Observatory, this fall is explained on the one hand by the fall and then the weakness in household purchasing power, and on the other hand by the expected slowdown in the distribution of mortgage loans, which will be strengthened in 2023. slower in 2022,” the study adds.

Collection benefited by booklets and in particular by the increase in the LEP rate

Regarding financial investment arbitrations, according to BPCE, French household benchmarks “remain blurred by both the return of inflation and the still limited increase in regulated interest rates, which at 1% are still far from the psychological threshold of probability to trigger significant arbitrage and which is close to 2.5%”. But the regulated savings accounts should, with the increase in the rate of the Livret A (2%) and the Livret d’épargne populaire (LEP) to 4.6% as of August 1st received new impetus Regulated booklets will continue to benefit from the runoff movement on the PEL, the latest generation of which offers a net tax return (0.7%) much lower than that of the Livret A.

For its part, life insurance benefits above all from the dynamics of unit-linked products, the dynamics of which are also fueled by old-age provision plans (PER). “Against a backdrop of strong appetite for retirement preparation, currently fueled by uncertainties surrounding the government’s pension reform project, net inflows excluding transfers to insurers’ PERs represent 28% of inflows. minus life insurance for a year,” explains BPCE. In addition, according to BPCE, unit-linked products also benefit from a limited but gradual decline in risk aversion in an economic climate generally viewed as unfavorable for the stock market, resulting in a shift of security flows into unit-linked life insurance for 18 months.

From the point of view of the BPCE economists, the trade-off between financial products, which is still guided by a wait-and-see attitude, the search for security and availability at the expense of risk, should therefore be disrupted by the magnitude of the sudden changes in regulatory interest rates in 2022 and 2023. They also mention “the impact of the surge in inflation perceived by households, be it the Livret A and the LEP in particular.” In particular, the LEP survey could even exceed the economists’ forecast by the bank – expected to be 7.2 billion euros a year 2022 – because their return (4.6%) is now well above the psychological reward threshold of 2.5%.